-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, g3IIiCwCIgMYZxrXQB2S+gM9qdGU9J5novPGZmguEEPlspFRKDnCZ3p2+e8H+P3A magfm0B4Yk48VnvQ7+Q+Dg== 0000071525-94-000013.txt : 19940816 0000071525-94-000013.hdr.sgml : 19940816 ACCESSION NUMBER: 0000071525-94-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLAIR CORP CENTRAL INDEX KEY: 0000071525 STANDARD INDUSTRIAL CLASSIFICATION: 5961 IRS NUMBER: 250691670 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00878 FILM NUMBER: 94542859 BUSINESS ADDRESS: STREET 1: 220 HICKORY ST CITY: WARREN STATE: PA ZIP: 16366 BUSINESS PHONE: 8147233600 FORMER COMPANY: FORMER CONFORMED NAME: NEW PROCESS CO DATE OF NAME CHANGE: 19890507 10-Q 1 2ND QTR FILING 1994 United States Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period Ended June 30, 1994 Commission File Number 1-878 BLAIR CORPORATION - - ------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 25-0691670 - - ------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 HICKORY STREET, WARREN, PENNSYLVANIA 16366-0001 - - ------------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (814) 723-3600 - - ------------------------------------------------------------------------ (Registrant's telephone number, including area code) Not applicable - - ------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- As of August 10, 1994 the registrant had outstanding 9,273,482 shares of its common stock without nominal or par value. PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS (UNAUDITED) BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 CONSOLIDATED BALANCE SHEETS BLAIR CORPORATION AND SUBSIDIARY June 30 December 31 1994 1993 ------------ ------------ ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,719,668 $ 2,937,432 Customer accounts receivable, less allowances for doubtful accounts and returns of $35,968,008 in 1994 and $34,255,648 in 1993 116,114,554 112,452,666 Inventories - Note F Merchandise 48,934,162 47,419,661 Advertising and shipping supplies 11,016,003 14,652,580 ------------ ------------ 59,950,165 62,072,241 Deferred income taxes 18,080,000 15,807,000 Prepaid expenses 730,956 409,562 ------------ ------------ TOTAL CURRENT ASSETS 196,595,343 193,678,901 PROPERTY, PLANT AND EQUIPMENT - at cost Land 1,169,791 719,791 Buildings 56,153,400 54,816,920 Equipment 30,743,959 29,721,911 Construction in progress 447,959 522,692 ------------ ------------ 88,515,109 85,781,314 Less allowances for depreciation 36,115,860 33,855,151 ------------ ------------ 52,399,249 51,926,163 ------------ ------------ TOTAL ASSETS $248,994,592 $245,605,064 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Note payable to bank $ 10,500,000 $ 11,600,000 Trade accounts payable 32,591,250 34,579,040 Advance payments from customers 2,230,859 1,886,186 Accrued expenses - Note D 10,299,955 9,651,354 Federal and state income taxes 3,085,684 4,758,684 ------------ ------------ TOTAL CURRENT LIABILITIES 58,707,748 62,475,264 DEFERRED INCOME TAXES 1,891,000 1,926,000 STOCKHOLDERS' EQUITY Common Stock without par value: Authorized 12,000,000 shares; issued 10,075,440 shares (including shares held in treasury) - stated value 419,810 419,810 Additional paid-in capital 9,595,875 9,595,875 Retained earnings 197,382,484 188,957,972 ------------ ------------ 207,398,169 198,973,657 Less 844,408 shares in 1994 and 809,408 shares in 1993 of Common Stock in treasury - at cost 17,526,017 16,056,017 Less receivable from Employee Stock Purchase Plan 1,476,308 1,713,840 ------------ ------------ 188,395,844 181,203,800 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $248,994,592 $245,605,064 ============ ============ See accompanying notes. CONSOLIDATED STATEMENTS OF INCOME BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ------------ ------------ ------------ ------------- Net sales $142,717,471 $137,281,872 $261,157,769 $256,783,223 Other income - Note G 5,906,341 5,207,569 11,941,897 10,413,455 ------------ ------------ ------------ ------------- 148,623,812 142,489,441 273,099,666 267,196,678 Costs and expenses: Cost of goods sold 67,438,296 65,451,325 123,988,490 123,514,532 Selling 30,112,279 33,813,163 57,613,644 65,524,490 General and administrative 22,901,698 21,454,499 44,144,643 41,565,059 Provision for doubtful accounts 6,960,674 5,497,330 12,499,483 10,174,189 ------------ ------------ ------------ ------------ 127,412,947 126,216,317 238,246,260 240,778,270 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES 21,210,865 16,273,124 34,853,406 26,418,408 Income taxes - Note E 8,504,000 6,913,000 13,967,000 11,032,000 ------------ ------------ ------------ ------------ NET INCOME $ 12,706,865 $ 9,360,124 $ 20,886,406 $ 15,386,408 ============ ============ ============ ============ Net income per share based on average shares outstanding - Note C $1.38 $1.02 $2.26 $1.67 ===== ===== ===== ===== See accompanying notes.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY BLAIR CORPORATION AND SUBSIDIARY
Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ------------ ------------ ------------ ------------ Common Stock $ 419,810 $ 419,810 $ 419,810 $ 419,810 Additional paid-in capital 9,595,875 7,775,814 9,595,875 7,775,814 Retained Earnings: Balance at beginning of period 187,906,481 173,844,944 188,957,972 182,111,957 Net income 12,706,865 9,360,124 20,886,406 15,386,408 Cash dividends declared - Note B (3,230,862) (3,227,519) (12,461,894) (17,520,816) ----------- ------------ ------------ ------------ Balance at end of period 197,382,484 179,977,549 197,382,484 179,977,549 Treasury Stock: Balance at beginning of period (17,526,017) (16,418,906) (16,056,017) (16,418,906) Purchase of common stock for treasury -0- -0- (1,470,000) -0- ----------- ------------ ------------ ------------ Balance at end of period (17,526,017) (16,418,906) (17,526,017) (16,418,906) Receivable from Employee Stock Purchase Plan: Balance at beginning of period (1,537,890) (1,170,195) (1,713,840) (1,454,490) Payments 61,582 45,990 237,532 330,285 ----------- ------------ ------------ ------------ Balance at end of period (1,476,308) (1,124,205) (1,476,308) (1,124,205) ----------- ------------ ------------ ------------ TOTAL STOCKHOLDERS' EQUITY $188,395,844 $170,630,062 $188,395,844 $170,630,062 ============ ============ ============ ============ See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS BLAIR CORPORATION AND SUBSIDIARY Six Months Ended June 30 1994 1993 ------------ ------------ OPERATING ACTIVITIES Net income $ 20,886,406 $ 15,386,408 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,261,542 2,238,343 Provision for doubtful accounts 12,499,483 10,174,189 Provision for deferred income taxes (2,308,000) (1,660,000) Changes in operating assets and liabilities (using) providing cash: Customer accounts receivable (16,161,371) (18,377,416) Inventories 2,122,076 11,350,704 Prepaid expenses (321,394) (162,319) Trade accounts payable (1,987,790) (5,065,583) Advance payments from customers 344,673 257,350 Accrued expenses 648,601 (2,023,300) Federal and state income taxes (1,673,000) 62,000 ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 16,311,226 12,180,376 INVESTING ACTIVITIES Purchases of property, plant and equipment (2,734,628) (6,220,216) Proceeds from sale of short-term investments -0- 902,576 ------------ ------------ NET CASH USED BY INVESTING ACTIVITIES (2,734,628) (5,317,640) FINANCING ACTIVITIES Proceeds from line of credit 68,400,000 51,350,000 Repayments on line of credit (69,500,000) (49,650,000) Dividends paid (12,461,894) (17,520,816) Purchase of common stock for treasury (1,470,000) -0- Payments on receivable from Employee Stock Purchase Plan 237,532 330,285 ------------ ------------ NET CASH USED BY FINANCING ACTIVITIES (14,794,362) (15,490,531) ------------ ------------ DECREASE IN CASH AND CASH EQUIVALENTS (1,217,764) (8,627,795) Cash and cash equivalents at beginning of year 2,937,432 9,118,850 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,719,668 $ 491,055 ============ ============ See accompanying notes. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Blair Corporation and its wholly-owned subsidiary have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 1994 are not necessarily indicative of the results that may be expected for the year ending December 31, 1994. For further information refer to the financial statements and footnotes included in the company's annual report on Form 10-K for the year ended December 31, 1993. On September 2, 1993, Blair formed a new wholly-owned subsidiary, Blair Holdings, Inc., a Delaware Corporation. The consolidated financial statements include the accounts of Blair Corporation and its subsidiary. All significant intercompany accounts and transactions are eliminated upon consolidation. NOTE B - DIVIDENDS DECLARED 2-10-93 $1.55 per share 2-09-94 $1.00 per share 5-12-93 .35 4-19-94 .35 8-10-93 .35 7-20-94 .35 11-10-93 .35 NOTE C - NET INCOME PER COMMON SHARE Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Net income $12,706,865 $ 9,360,124 $20,886,406 $15,386,408 Average shares outstanding 9,231,032 9,221,482 9,241,032 9,221,482 Net income per common share $1.38 $1.02 $2.26 $1.67 NOTE D - ACCRUED EXPENSES Accrued expenses consist of: June 30 December 31 1994 1993 ----------- ----------- Employee compensation $ 6,321,446 $ 5,081,753 Contribution to profit sharing and retirement plan 2,229,110 3,294,397 Taxes, other than taxes on income 237,048 199,687 Other accrued items 1,512,351 1,075,517 ----------- ----------- $10,299,955 $ 9,651,354 =========== =========== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 NOTE E - INCOME TAXES The components of income tax expense are as follows: Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Currently payable: Federal $ 8,150,000 $ 5,203,000 $13,257,000 $ 9,010,000 State 1,893,000 2,130,000 3,018,000 3,682,000 ----------- ----------- ----------- ----------- 10,043,000 7,333,000 16,275,000 12,692,000 Deferred (credit) (1,539,000) (420,000) (2,308,000) (1,660,000) ----------- ----------- ----------- ----------- $ 8,504,000 $ 6,913,000 $13,967,000 $11,032,000 =========== =========== =========== =========== The currently payable state income tax provisions for the second quarter and first six months of 1994 reflect a reduction in the company's effective state tax rate as compared to the second quarter and first six months of 1993. The differences between total tax expense and the amount computed by applying the statutory federal income tax rate, 35% in 1994 and 34% in 1993, to income before income taxes are as follows: Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Statutory rate applied to pre-tax income $ 7,423,803 $ 5,532,862 $12,198,692 $ 8,982,259 State income taxes, net of federal tax benefit 1,017,900 1,325,940 1,643,200 2,152,260 Other items 62,297 54,198 125,108 (102,519) ----------- ----------- ----------- ----------- $ 8,504,000 $ 6,913,000 $13,967,000 $11,032,000 =========== =========== =========== =========== The increase in the statutory federal income tax rate from 34% to 35% was enacted into law in August 1993, effective January 1, 1993 Components of the provision for deferred income tax credit are as follows: Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Provision for estimated returns $ (133,000) $ (149,000) $ 876,000 $ 286,000 Provision for doubtful accounts 153,000 420,000 483,000 890,000 Cumulative effect adjustment as of January 1, 1993 of change in method of accounting for income taxes -0- -0- -0- 207,000 Advertising costs 1,466,000 -0- 847,000 -0- Other items - net 53,000 149,000 102,000 277,000 ---------- ----------- ----------- ----------- $ 1,539,000 $ 420,000 $ 2,308,000 $ 1,660,000 =========== =========== =========== =========== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 NOTE E - INCOME TAXES - Continued In the first quarter of 1993, the company adopted Financial Accounting Standards Board Statement No. 109 on accounting for income taxes. Prior to the adoption of Statement No. 109, income tax expense was determined using the deferred method. This accounting change did not have a material impact on the company - financial position increased by $207,000, $.02 per share. Significant components of the company's deferred tax assets and liability as of June 30, 1994 and December 31, 1993 are as follows: June 30 December 31 1994 1993 ----------- ----------- Current deferred tax assets - net: Allowance for doubtful accounts $11,988,000 $11,505,000 Allowance for returns 2,609,000 1,733,000 Allowance for inventory obsolescence 1,705,000 1,705,000 Accrued vacation pay 1,079,000 1,061,000 Inventory costs 1,068,000 1,019,000 Advertising costs (763,000) (1,610,000) Other items 394,000 394,000 ----------- ----------- $18,080,000 $15,807,000 =========== =========== Long-term deferred tax liability: Tax over book depreciation $ 1,891,000 $ 1,926,000 =========== =========== NOTE F - INVENTORIES Inventories are valued at the lower of cost or market. Cost of merchandise inventories is determined principally on the last-in, first-out (LIFO) method. Cost of advertising and shipping supplies is determined on the first-in, first- out (FIFO) method. If the FIFO method had been used for all merchandise inventories, the total amount would have increased by approximately $8,508,000 at June 30, 1994 and $8,358,000 at December 31, 1993, respectively. NOTE G - OTHER INCOME Other income consists of: Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Finance charges on time payment accounts $ 5,288,174 $ 4,601,764 $10,744,718 $ 9,018,680 Other items 618,167 605,805 1,197,179 1,394,775 ----------- ----------- ----------- ----------- $ 5,906,341 $ 5,207,569 $11,941,897 $10,413,455 =========== =========== =========== =========== Finance charges on time payment accounts are recognized on an accrual basis of accounting based upon principal balances outstanding. NOTE H - EMPLOYEE STOCK PURCHASE PLAN The company has an Employee Stock Purchase Plan wherein shares of treasury stock may be issued to certain employees at a price established at the discretion of the Employee Stock Purchase Plan Committee. The stock issued under the Plan was 42,450 shares on July 7, 1994 and 44,550 shares on July 6, 1993. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 RESULTS OF OPERATIONS - - --------------------- New records for second quarter and six month net sales were set in 1994. Net income reached record levels in the second quarter and first six months of 1994, increasing 35.8% and 35.7% from the same periods of 1993. The record earnings were primarily attributable to increased response rates. In 1994, increased response to the multi-product customer mailings, the home furnishings catalogs and the co-op and media programs achieved comparable sales volumes despite reductions in the total advertising program. Customer and prospect advertising mailings and the co-op and media programs were decreased resulting in lower selling expenses in 1994. Net sales for 1994 increased 4.0% and 1.7% over the prior record sales of the second quarter and first six months of 1993. The response to customer advertising mailings increased 9.2% and 10.9% in 1994. Response to the home furnishings catalogs during the six months of 1994 was running better than 40% over the 1993 response rate to home furnishings multi-product customer mailings. Response to the co-op and media programs increased 29.8% and 3.7% in 1994. Advertising dollars spent in 1994 returned more in gross sales than in 1993 - 16.3% more in the second quarter, 15.2% more in the first six months. The number of orders filled in 1994 decreased 5.1% and 7.4% from 1993 but the average order size increased 8.4% and 9.0%. Returns as a percentage of adjusted gross sales improved in 1994, decreasing to 14.8% and 15.0% from 15.3% and 15.5% in 1993. Returns improved due to changes in product mix (more higher quality products) and sales mix (fewer prospects) in 1994. Other income increased 13.4% and 14.7% in the second quarter and six months of 1994 as compared to 1993. The increases were due to finance charges assessed on increased Easy Payment Plan accounts receivable. The direct mail multi- product prospect advertising program offers the Easy Payment Plan to first-time buyers. The program has been greatly responsible for an average 19.8% increase (approximately $22,250,000) in Easy Payment Plan accounts receivable in 1994 as compared to 1993. Gross Easy Payment Plan sales were 11.0% and 8.2% higher in the second quarter and six months of 1994 as compared to 1993. Cost of goods sold as a percentage of net sales decreased to 47.3% and 47.5% in 1994 from 47.7% and 48.1% in 1993. Fewer prospect (first-time buyers) orders at incentive pricing and lower returns (14.8% and 15.0% in 1994, 15.3% and 15.5% in 1993) were primarily responsible for the improved margins in the 1994 periods. Selling expenses in the second quarter and first six months of 1994 decreased 10.9% and 12.1% from 1993. The decrease selling expenses were attributable to reductions in advertising mailings and the co-op and media programs. The total number of advertising mailings released in the second quarter of 1994 was 16.8% less than in 1993 (1994 - 59,458,000, 1993 - 71,493,000). A 14.1% decrease in multi-product customer mailings (1994 - 43,102,000, 1993 - 50,187,000), a 27.6% decrease in multi-product prospect mailings (1994 - 13,456,000, 1993 - 18,590,000) and a 6.8% increase in single-product mailings (1994 - 2,900,000, 1993 - 2,716,000) resulted in a net direct mail advertising cost reduction of approximately $4,550,000. The total number of advertising mailings released in the six months of 1994 was 19.1% less than in the first ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 RESULTS OF OPERATIONS - CONTINUED - - --------------------- six months of 1993 (1994 - 112,765,000, 1993 - 139,320,000). A 13.5% decrease in multi-product customer mailings (1994 - 83,314,000, 1993 - 96,312,000) a 36.3% decrease in multi-product prospect mailings (1994 - 24,084,000, 1993 - 37,823,000) and a 3.5% increase in single-product mailings (1994 - 5,367,000, 1993 - 5,185,000) resulted in a net direct mail advertising cost reduction of approximately $9,520,000. Customer mailings have decreased in 1994 primarily due to the better targeting of mailings, the removal of non-responding names from the customer file and the full list offerings of home furnishings catalogs. Prospect mailings have decreased in 1994 due to the elimination of poorly performing acquired mailing lists and tightened credit policies. Total volume of the co-op and media advertising programs decreased 35.1% and 12.6% in the second quarter (1994 - 393 million, 1993 - 605 million) and six months (1994 - 1,032 million, 1993 - 1,182 million) of 1994 as compared to 1993. The decreased volume and 3.5% and a 5.0% reductions in average production and placement costs resulted in net cost decreases of approximately $2,010,000 (second quarter) and $1,880,000 (six months). Home furnishings catalogs, offering 350 to 400 products, mailed in 1994 numbered 4,887,000 in the second quarter and 5,971,000 in the first six months. Results continue to be favorable and more full customer list releases and a 6 million catalog prospect program have been scheduled for the second half of 1994. Test mailings of men's and women's apparel catalogs have been scheduled for fall 95 and spring 96. Catalog mailings increased selling expenses in the second quarter and six months of 1994 by approximately $2,700,000 and $3,290,000. General and administrative expenses increased 6.7% in the second quarter and 6.2% in the six months of 1994 as compared to 1993. The higher expenses for 1994 primarily resulted from 6.8% and 7.8% increases in wage and benefit costs. Wages and benefits were higher due to normal pay increases, increased profit sharing and a larger work force. The number of employees increased, on average, 5.3% in the second quarter and 3.0% year-to-date. The provision for doubtful accounts as a percentage of credit sales increased 18.2% and 17.7% in the 1994 periods as compared to 1993. Credit sales increased 7.1% in the second quarter and 4.4% year-to-date. Prospect (first-time buyer) credit sales as a percentage of total credit sales were approximately 9.5% and 9.0% in the second quarter and six months of 1994 as compared to approximately 13.6% and 13.0% in 1993. In 1994, bad debts have been provided for using rates based on current 1993 experience. Had similar rates been applied to the second quarter and first six months of 1993, the 1993 provisions for doubtful accounts would have been approximately $2,000,000 and $3,000,000 higher. As a percentage of credit sales, the revised 1993 provisions would have been 16.3% and 11.0% higher than the 1994 provisions. Income taxes as a percentage of income before income taxes were 40.1% in the second quarter and six months of 1994 as compared to 42.5% and 41.8% in 1993. An increase in the federal income tax rate from 34% to 35% was enacted into law in August 1993, retroactive to January 1, 1993. The federal increase was more ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 RESULTS OF OPERATIONS - CONTINUED - - --------------------- than offset by a downward adjustment of the company's effective state income tax rate. Income taxes for the first and second quarter of 1993 do not reflect the federal and state changes as they did not come into effect until the third quarter of 1993. The company adopted Financial Accounting Standards Board Statement No. 109 on accounting for income taxes in the first quarter of 1993. Due to the relative insignificance of the adoption of this change in accounting, it was reported as a reduction in the company's first quarter 1993 income tax expense in the amount of $207,000. On August 30, 1993, the company opened a new retail store in Wilmington, Delaware. The Delaware site was chosen due to the population density of Delaware and the surrounding states and the favorable business climate. In addition, on September 2, 1993, Blair formed a new wholly-owned subsidiary, Blair Holdings, Inc., a Delaware corporation. LIQUIDITY AND SOURCES OF CAPITAL - - -------------------------------- The company continued to be in a positive cash position during 1994. All working capital needs were met and suppliers' invoices were timely paid in order to maximize discounts. The company has $40,000,000 available in lines of credit, $10,000,000 with no specified expiration date and $30,000,000 expiring May 31, 1995. Management anticipates renewing the lines upon their expiration. The company incurred a total of $68,400,000 in short-term borrowing during the first half of 1994, $10,500,000 of which was outstanding at June 30, 1994. There were no long-term borrowings and excess funds when available were invested in federal government obligations, commercial paper and tax free securities. The ratio of current assets to current liabilities was 3.35 at June 30, 1994, 3.10 at December 31, 1993 and 3.55 at June 30, 1993. Working capital increased $6,683,958 during the six months of 1994. The increase was primarily reflected in increased customer accounts receivable and deferred income taxes and decreased note payable to bank, trade accounts payable and federal and state income taxes offsetting decreased cash and cash equivalents and inventories. The 1994 six month increase in working capital was the result of the record net income and reductions in capital expenditures and dividends. Merchandise inventory turnover was 3.69 at June 30, 1994 3.82 December 31, 1993 and 3.64 at June 30, 1993. Merchandise inventory has increased 22.6% from June 30, 1993 to June 30, 1994 primarily due to the expansion of the home furnishings product line. The turnover rate has been relatively constant as sales have increased 3.9% over the last twelve months and the average FIFO merchandise inventory has increased 2.7%. The company had added new facilities, modernized its existing facilities and acquired new cost saving equipment during the last several years. Capital expenditures for property, plant and equipment totaled $2,734,628 during the six months of 1994 and $6,220,216 during the first six months of 1993. The company has completed over 95% of the renovation of its headquarters facility in Warren. Renovation of the first two levels was completed in ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 LIQUIDITY AND RESOURCES - CONTINUED - - ----------------------- February 1993. The remaining two levels should be completed by the end of 1994. Total cost of the renovation is estimated at $13,600,000 (including office furniture). Total cost incurred as of June 30, 1994 was approximately $13,200,000. The new Delaware retail store which opened August 30, 1993 and the new wholly- owned subsidiary, Blair Holdings, Inc., formed September 2, 1993, are both in leased facilities and required little in the way of capital expenditure. The company completed its new Erie, Pennsylvania outlet store. Total cost of the new store, which opened May 23, 1994, was $2.1 million. The company has undertaken a study of the distribution center. The study will focus on operational and customer service improvements. The project enlists consultants who have worked with the company on previous projects. Future capital expenditures for the distribution center will depend on the results of the study, which aren't anticipated until Fall 1994. It is anticipated that planned capital expenditures for the years ahead will be financed by cash flow from operations and short-term borrowings. IMPACT OF INFLATION AND CHANGING PRICES - - --------------------------------------- Although inflation has moderated in our economy, the company is continually seeking ways to cope with its impact. To the extent permitted by competition, increased costs are passed on to customers by selectively increasing selling prices over a period of time. During the past several years, selling prices have been raised sufficiently to offset increased merchandise costs, thereby realizing profit margins that continue to build fiscal strength. The company principally uses the LIFO method of accounting for its merchandise inventories. Under this method, the cost of products sold reported in the financial statements approximates current costs and thus reduces distortion in reported income due to increasing costs. The charges to operations for depreciation represent the allocation of historical costs incurred over past years and are significantly less than if they were based on the current cost of productive capacity being used. Property, plant and equipment are continuously being expanded and updated. Recent major projects are discussed under Liquidity and Sources of Capital. Assets acquired in prior years will, of course, be replaced at higher costs but this will take place over many years. New assets, when acquired, will result in higher depreciation charges, but in many cases, due to technological improvements, savings in operating costs should result. The company considers these matters in setting pricing policies. Present tax laws do not allow deductions for the impact of inflation. Thus, taxes are levied on the company at rates which, in real terms, exceed established statutory rates. In general, during periods of inflation, this tax policy results in a tax on stockholders' investment in the company. PART II. OTHER INFORMATION BLAIR CORPORATION AND SUBSIDIARY June 30, 1994 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. --------------------------------------------------- (a) The company's Annual Meeting of Stockholders was held April 19, 1994. (b) At the Annual Meeting of Stockholders, all of the company's directors were elected at said meeting, as follows: David A. Blair John O. Hanna Giles W. Schutte John L. Blair * Gerald A. Huber Blair T. Smoulder Robert W. Blair Murray K. McComas John E. Zawacki Steven M. Blair Michael J. Samargya Since all of the directors of the company were elected at the Annual Meeting of Stockholders, there are no directors whose term of office as a director continued after the meeting. (c) The following other matter was voted upon at the meeting, and the following number of affirmative votes and negative votes were cast with respect to such matter: The reappointment by the company's Board of Directors of the firm of Ernst & Young as independent certified public accountants to examine the financial statements and perform the annual audit of the company for the year ending December 31, 1994 was ratified. This ratification received 8,533,497 affirmative votes and 24,408 negative votes. * John L. Blair has resigned from the Board of Directors, effective July 20, 1994, and has been named Chairman Emeritus. Item 5. OTHER INFORMATION ----------------- The company filed a Registration Statement on Form S-8 on July 6, 1994 registering 42,450 shares of the company's Common Stock which was offered for purchase on July 7, 1994 to selected employees of the company under and in accordance with the company's Employee Stock Purchase Plan. Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) EXHIBITS -------- None (b) REPORTS ON FORM 8-K ------------------- No reports on Form 8-K were filed during the quarter ended June 30, 1994. SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant had duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BLAIR CORPORATION --------------------------------- (Registrant) Date August 10, 1994 By Giles W. Schutte ------------------------ --------------------------------- Giles W. Schutte Executive Vice President and Treasurer (Principal Financial Officer) EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BLAIR CORPORATION'S 6/30/94 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH SECOND QUARTER, 1994 10-Q FILING FOR BLAIR CORPORATION. 0000071525 BLAIR CORPORATION 6-MOS DEC-31-1994 JUN-30-1994 1,719,668 0 152,082,562 35,968,008 59,950,165 196,595,343 88,515,109 36,115,860 248,994,592 58,707,748 0 419,810 0 0 187,976,034 248,994,592 261,157,769 273,099,666 123,988,490 238,246,260 0 12,499,483 167,073 34,853,406 13,967,000 0 0 0 0 20,886,406 2.26 2.26 THIS AMOUNT IS MADE UP OF ADD'L PD IN CAPITAL, RETAINED EARNINGS, TREASURY STOCK AND THE EMPLOYEE STOCK PURCHASE PLAN RECEIVABLE. CONSULT THE 6/30/94 FINANCIAL STATEMENTS INCLUDED IN THE SECOND QUARTER, 1994 10-Q FOR THE DETAILED AMOUNTS OF EACH OF THESE ITEMS.
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